Liberal Democratic Party Diet Member Taro Kono Discusses Japanese Politics and the Role of the LDP

LDP Diet member Taro Kono spoke at Japan Society about his vision of the new LDP and his hopes for Japan's future.

With the LDP's historic defeat in the general elections this past summer, the party "is out in the wilderness," Mr. Kono said. "We don't know how to behave in the parliament," nor does the DPJ know how to behave in government. "It's a big mess right now, and we don't know who is leading Japan to where."

The LDP began as an anticommunist party that "stood for democracy and the market economy for a long time," but with the fall of the Berlin wall and the disappearance of the Soviet Union, the LDP had won its battle against the threat of communism, he said. "What does LDP stand for? We couldn't really define ourselves, so we just simply answered well, the Liberal Democratic Party is the government party." Now that Prime Minister Hatoyama's DPJ is in power, "we just have to say we are the opposition."

It's time "to redefine the Liberal Democratic Party as the small government party," he declared. "We don’t want any unnecessary tax. We don’t want to spend an unnecessary budget. We want to keep the government small and let business run the show. We want to create a fair, healthy market economy so that everyone can compete," and "to give more authority to the local government so the people can decide what's good for themselves, closer to them."

The DPJ, by contrast, "is heavily backed by the labor unions, so DPJ will have to create big government. They can't go for the small government, because it's like shooting their own foot," he commented. "So DPJ will be the big government party. They will raise taxes" in order "to redistribute the wealth among the people." The result may be a "more equal society," but "the economy will not grow much in that kind of environment."

If the two parties alternate in power, Mr. Kono said, "I think Japan will have the better future." Indeed "that should be one of our goals, to create a healthy, bipartisan system in Japanese politics."

"When I say small government, I don't mean small small government," he emphasized. "I mean big small government," a government that supports pension systems, medical care, child care, and care for the aging, but cuts budgets in other areas, gets rid of unnecessary regulations, and bolsters the power of local governments.

To gain support in elections, the LDP over the years ended up subsidizing losing industries and losing companies, especially in banking, agriculture and construction. "What LDP should have been doing is to provide them the safety net so they can actually exit the market, get retraining, and reenter" more promising sectors. Since 1996, I realized any industries that are closer to LDP, the closer those industries are, the less competitive in the market. So we created a funny situation. We should be the more conservative party, but we are actually playing some kind of socialist role. So, I often said the LDP is the most successful communist party on the planet, because back in the 1980s, Japan by far was the most equal society, egalitarian society. "

The model couldn't be sustained. Government deficits grew too high, and the costs of ever-increasing borrowing were too great. "The Chinese economy came into the global economy, and we have to compete against them," but only a handful of companies like Toyota and Sony can do so successfully in the international market, he said.

"So right now we are out in the wilderness and we are the opposition." There is in his view a certain liberating effect of this. The industries that had supported the LDP for so long "said goodbye to the LDP and ran to DPJ.... They will probably come back when we're back in the government, but we probably don't need them anymore."

"There is not enough of a sense of crisis in the LDP, unfortunately," Mr. Kono said. To regain the members it lost, the LDP needs "to create a new party with a new vision, new ideas, so that we can attract people with vision and ideas" who will stay with the party in and out of power.

The LDP's new vision must address immigration; bringing women and senior workers into the workforce, though an important step, won't be enough to fill a labor shortage that by 2040 is predicted to reach several million. "The only way to solve the problem is we have to ask foreign labor coming in to Japan," he said. This means closing the "back door" that brought in Japanese South Americans and Chinese "trainees" as cheap labor, and "open[ing] up the front door with a labor visa." The labor visa should be based not on ethnicity but on the ability to speak Japanese, lest the country repeat the problems experienced by foreign workers who spoke only Portuguese or Spanish and weren't able to integrate into the community despite their Japanese heritage.

"Our agriculture can actually be very competitive," Mr. Kono continued. The DPJ's agricultural subsidy policies are unacceptable; instead, Japan needs to get small part-timers "to exit from the market and consolidate the fields to those who are really willing to put effort into agriculture."

The new LDP must also address agricultural reform, the lack of which has held back free trade agreements, he said. "The first free trade agreement that we made was with Singapore, because Singapore has no agriculture. But during the negotiation, we found out that they have a goldfish industry in Singapore and that delayed [the negotiations] by six months." FTAs with other Asian countries are of vital importance, "because that's where the growth is in the 21st century, or at least the first half of it. If we integrate the Japanese market into the Asian economy, I think that's where we want to go."

Medical care, childcare and care for the aging ought to be looked at not merely as costs, but as sources of employment, he reflected. In the past, care for the aged "was totally dependent on the sacrifice of women" who left the workplace to care for aging family members at home, but "we cannot continue doing it." If women are to go into the workforce in large numbers, Japan has to invest tax monies to care for the elderly. Finally, "we have to pay more attention to the Japanese-American community in the United States," who "hopefully... would always pay attention to Japan if we don't forget about them."

***Q&A from the audience followed:
With upsets in countries like Poland, Greece and Spain, many people worry that Japan will be next. Is concern over Japan's budget deficit justified? If you were the government party, what would you do to get the deficit under control?

"The budget deficit is the major concern," replied Mr. Kono. Japan needs to raise the consumption tax; channel tax revenues to local governments and give them greater authority, to reduce overlap and trim costs; and shrink the number of government workers. "We are no longer the socialist LDP and we just have to cut unnecessary programs, although it’s going to hurt."
Could you comment on Prime Minister Hatoyama's stance on the U.S.-Japan security treaty and the issue of Futenma and the base relocation?

"Hatoyama-san and his cabinet knew that they were going to be forming the government probably six months before the general election" and "should have been prepared for this issue, but I don't think they've done the homework," Mr. Kono said. The Kadena option is better than building a new airstrip off Camp Schwab in northern Okinawa, in his view, because it would preserve shore areas for tourism.

DPJ Secretary-General Ozawa has been "talking about the sort of equal distance with China and the United States. That is a crazy notion" and a "confusing signal. DPJ has to get back to their own senses," he added.
Liberalizing Japan's Byzantine distribution structure would free up labor and bring the labor supply/demand issue into better balance. What strategies are you considering on this?

Much commerce-related regulation is designed "to protect the old system, and we need to scrap that," Mr. Kono said. Rather than using the stimulus money to save old industries and old companies, "we should create a stronger safety net so that people can easily get out of the market," be retrained and reenter the labor force. Improving the health care system will help create demand for workers. Tourism should be another focus; "per capita international tourism into Japan is very small, and there's a huge Chinese tourist market next to us, and that's where we need to be looking into."

If you were prime minister right now, what would you do differently about deflation, which many are concerned will be accelerated by eased regulations on immigration?

"The government needs to work with BOJ closely" and to select the bank's leadership carefully to counter the BOJ's tendency to focus on inflation and be "very soft on deflation," Mr. Kono responded.

"Actually, setting up immigration policy would help solve the deflation problem rather than creating it. I think that we have to be honest with the people that the Japanese government is financially not capable of sustaining losing industries," and "to encourage people to try their ideas in the market" and to become more entrepreneurial.

Presider George Packard of the United States-Japan Foundation asked:
You have recommended that Article 9 of the constitution be amended to clarify Japan's right to defend itself. If you open up that question, do you risk getting something that might be worse than Article 9?

"We do have a noisy minority, especially from the right side," but "I trust the judgment of our people. I would rather trust the silent majority to counter this noisy minority" on this issue, Mr. Kono said.
You said that if you were prime minister you would not be visiting the Yasukuni shrine. What is the long-term solution for the shrine?

Segregating class A war criminals elsewhere is one option; building a totally new, nonreligious institution is another and either "would be fine with me," he said. The emperor has curtailed his visits to the shrine, and indeed "the current Yasukuni shrine is not a good place to visit for the emperor or for any head of state."

"We have to change that" and discuss the issue openly, he added. "It has nothing to do with China; it has nothing to do with Korea. It's for us to decide."
A member of the audience asked:

On immigration: Are there enough people living overseas who speak Japanese and can fill a factory job?

Speaking the language is "the real key to coming into the society," Mr. Kono answered. Japanese Brazilians who came to work in blue-collar jobs "created their own Portuguese-language community" which "was separated in most cases from the Japanese community. That was not good for them and not good for us."